Introduction 

Harvard defined supply chain inclusion, often referred to as supply chain diversity, as the involvement of businesses that are fifty one percent (or more) owned by minority groups within a company’s supply chain1. This could be ethnic minorities, women, the LGBTQ+ community, those with disabilities – any minority group, as long as they make up the majority. 

In recent years, expectations of businesses have increased regarding Diversity, Equity and Inclusion. Consumer interest in these ethics has gone up greatly. Large companies such as McDonalds and Microsoft promote DEI among their suppliers, feeling that they should continue to grow and evolve in this way. These companies have an abundant number of staff and huge budgets dedicated to supply chain diversity2. In comparison, data from the Association for Supply Chain Management suggests that only 24% of small businesses have improved supply chain DEI as an objective. It is extremely important that all businesses focus on supply chain inclusion for numerous reasons. This white paper will provide some of those reasons. 

Put simply, supply chain Inclusion is a business strategy that ensures a diverse supplier base in the procurement of goods and services for any business or organisation. It emphasises the creation of a diverse supply chain that works to secure the inclusion of diverse groups in the procurement plans for government, not-for-profits, and private industry.  

Research shows that companies that embrace diversity are more profitable than companies that don’t: 

“On average, supplier diversity programs add $3.6 million to the bottom line for every $1 million in procurement operation costs. The high return on investment is undeniable… A positive ROI that boosts socially conscious reputation should push supplier diversity to the forefront of business strategy.3” – 2015 study by The Hackett Group. 

The business case for supply chain inclusion 

• A common misconception is that diversity is a quota system or social program designed to benefit selected groups while adding little to no value to the bottom line.  

• The fact is that a competitive advantage exists, as progressive organisations that have already implemented an effective strategy have realised. 

• Supplier diversity is beneficial to all stakeholders, not just to the companies with programs.  

• First and foremost, supplier diversity programming adds economic value, because it encourages the growth of diverse businesses. Diverse businesses typically encounter barriers that challenge their start-up and sustainability, such as access to capital and networking opportunities, so effective supplier diversity strategies can alleviate these pain points. 

• Minority-owned small businesses, certified by the National Minority Supplier Development Council (NMSDC), play a vital role in creating and preserving over 2.2 million jobs, both directly and indirectly, for individuals employed by these businesses. Furthermore, these minority suppliers contribute significantly to the economy, generating approximately $49 billion in tax revenue that benefits local, state, and federal governments2. 

 

Why is Supplier Diversity is Important in vendor management 

• Promotes innovation: Supplier diversity encourages the entry of new, innovative vendors, leading to the introduction of fresh products, services, and solutions. This influx of new ideas can help companies stay ahead of the curve, addressing emerging needs and staying competitive in a rapidly changing market. 

• Provides multiple channels: Diverse suppliers offer alternative channels for procuring goods and services, reducing dependence on a single vendor and mitigating the risk of supply chain disruptions. This diversification ensures a more resilient and adaptable supply chain. 

• Drives competition: Supplier diversity fosters competition among vendors, driving better prices, improved service levels, and enhanced quality. This competitive environment encourages existing vendors to innovate and improve, while new vendors bring fresh perspectives and approaches. 

• Supports business expansion: By engaging with diverse suppliers, companies can tap into emerging consumer needs driven by shifting demographic realities. This enables businesses to expand into new markets, capitalise on growth opportunities, and stay relevant in a changing landscape. 

• Displays commitment to diverse markets: Supplier diversity demonstrates an organisation’s commitment to doing business beyond consumerism, showcasing its dedication to diverse markets and communities. This commitment can enhance reputation, build trust, and foster loyalty among diverse customer bases. 

• Showcases interest in economic growth: By investing in diverse suppliers, companies demonstrate their interest in the economic growth of all communities. This commitment to inclusive economic development can lead to increased community engagement, improved social outcomes, and a more equitable distribution of economic opportunities. 

 

 

Why Certify? 

• Authentication of diverse ownership: Certification ensures that a business is genuinely owned, managed, and controlled by a diverse group, preventing misrepresentation and ensuring opportunities are accessible to authentic diverse suppliers. 

• Access to government and corporate contracts: Certification unlocks opportunities for diverse suppliers to contract with government agencies and large corporations, leading to revenue growth, capacity building, and increased competitiveness. 

• Third-party certification services: Reputable certification entities offer internationally recognised services, ensuring businesses are accurately categorised and maintaining the integrity of the certification process. 

• Regional and local certification services: Regional and local governments offer certification services, providing more accessible pathways for diverse suppliers to get certified and receive targeted support. 

Benefits of certification 

• Increased visibility and credibility: 

Certification raises a supplier’s profile, making them more visible to potential customers, partners, and investors. This increased visibility: 

– Enhances reputation and credibility 

– Establishes the supplier as a credible and reliable partner 

– Opens doors to new business opportunities 

– Differentiates the supplier from competitors 

• Improved access to capital and resources: 

Certification can lead to: 

– Access to specialised funding programs and grants 

– Improved relationships with banks and financial institutions 

– Increased access to mentorship and business development resources 

– Participation in supplier development programs 

This improved access enables suppliers to: 

– Invest in growth and expansion 

– Enhance operational efficiency 

– Develop new products and services 

– Increase capacity and capabilities 

• Enhanced networking opportunities: 

Certification provides access to: 

– Industry events and conferences 

– Networking sessions with corporate buyers and other suppliers 

– Membership in diversity-focused organisations 

– Opportunities to connect with influencers and thought leaders 

These networking opportunities enable suppliers to: 

– Build relationships with key decision-makers 

– Stay informed about industry trends and best practices 

– Identify new business opportunities 

– Collaborate with other suppliers and partners 

• Greater competitiveness in the market: 

Certification helps suppliers: 

– Differentiate themselves from competitors 

– Demonstrate commitment to diversity and inclusion 

– Showcase expertise and capabilities 

– Access new markets and customers 

 

This increased competitiveness enables suppliers to: 

– Win new contracts and business 

– Expand market share 

– Increase revenue and growth 

– Enhance long-term sustainability 

 

• Ability to participate in diversity-focused initiatives: 

Certification enables suppliers to participate in: 

– Diversity and inclusion programs 

– Mentorship and protégé programs 

– Joint ventures and partnerships 

– Industry-specific initiatives 

These initiatives provide opportunities for suppliers to: 

– Collaborate with other diverse suppliers 

– Access new markets and customers 

– Develop new skills and capabilities 

– Contribute to industry-wide diversity and inclusion efforts 

Challenges and limitations of Certification 

• Cost and administrative burden: The certification process can be costly and time-consuming, requiring significant resources and effort to prepare and submit applications, gather required documentation, and pay certification fees, which can be a barrier to entry for small or resource-constrained suppliers. 

• Potential for misuse or exploitation: The certification process can be vulnerable to misuse or exploitation by suppliers misrepresenting their diversity status, entities offering fake or fraudulent certifications, or organisations exploiting diverse suppliers for marketing purposes, which can undermine the integrity of certification programs. 

• Limited recognition or acceptance by some organisations: Certification may not be universally recognised or accepted by all organisations due to lack of awareness, different certification standards, limited resources, or biases, which can limit the benefits and opportunities available to certified suppliers. 

• Need for ongoing recertification and compliance: Certification typically requires ongoing recertification and compliance, involving periodic renewal applications, continued documentation, and adherence to evolving certification standards, which can create an administrative burden and require significant resources to maintain certification. 

Importance of certification entities 

The following entities are crucial in ensuring the integrity and recognition of certification, providing a standardised process for diverse suppliers to access opportunities; 

• Women’s Business Enterprise National Council (WBENC),  

• National Minority Supplier Diversity Council (NMSDC),  

• National Gay and Lesbian Chamber of Commerce (NGLCC) 

• Minority Supplier Diversity UK (MSDUK) 

The certification entities mentioned play a vital role in promoting diversity and inclusion in the business world. By providing third-party certification services, they ensure that businesses are accurately categorised, enabling them to access opportunities and resources tailored to their specific needs. This categorisation also facilitates connections between diverse businesses and corporations seeking to diversify their supply chains. 

The international recognition of these certification entities lends credibility and trustworthiness to the businesses they certify, opening doors to new markets, partnerships, and revenue streams. Moreover, the involvement of regional bodies and local governments in offering certification services demonstrates a commitment to supporting diverse businesses at various levels, fostering economic growth and development within communities. 

The entities mentioned, such are pioneers in their respective fields, championing the causes of women, minorities, and LGBTQ+ individuals in business. Their certification programs have created a level playing field, enabling diverse businesses to compete and thrive in an often-challenging market landscape. 

The Role of Regional and Local Governments 

Regional and local governments play a pivotal role in empowering diverse suppliers by offering certification services that are streamlined and tailored to local needs, enabling diverse suppliers to access new opportunities. They also provide training and development programs that equip diverse suppliers with the skills and knowledge they need to enhance their competitiveness and capacity. 

Additionally, regional and local governments provide diverse suppliers with access to resources such as capital, mentorship, and networking opportunities, facilitating business growth and expansion. They also implement local economic growth initiatives that foster inclusive economic development, creating a supportive ecosystem for diverse suppliers to thrive. 

Through their community engagement efforts, regional and local governments collaborate with local organisations, businesses, and stakeholders to promote diversity and inclusion, ensuring a cohesive approach to supporting diverse suppliers. By taking an active role in supporting diverse suppliers, regional and local governments can stimulate local economic growth and job creation, enhance community development and social cohesion, foster innovation and entrepreneurship, promote diversity, equity, and inclusion in the business community, and attract and retain businesses, talent, and investment in the region. 

Benefits of Supply Chain Inclusion  

• Company Growth  

Consumers recognise and appreciate when a company has strong inclusion ethics. Supply chain inclusion can help to grow your business for this reason. One report from CVM solutions which measured the success of supplier inclusion programs found that sales of minority-ran businesses are growing twice as fast as the national average10. Similarly, a study from the Conference Board of Canada reported that businesses that develop supply chain inclusion programs often see a higher ROI from their procurement, as well as less risks to their supply chain and decreased operating expenses.  These reports emphasise that supply chain inclusion can be an important component of company growth. 

• Customer Base 

The world is a diverse place. Therefore, your customer base is likely to comprise of diverse people. If people see themselves reflected in a business, they may feel more inclined to support that business compared to one they do not see themselves in. Young people in particular feel this way, even if they do not belong to a minority group themselves10. They wish to support small, minority-owned businesses and often view their products as having more of a personal touch. Supply chain inclusion assists businesses in appealing to diverse customer bases in this way. 

• Attracting and Retaining Talent 

When individuals are dedicating a lot of their time and talent to working for a business, it is often a priority for them to feel as if the business reflects their values. A report on sustainable supply chains from Ernst and Young infers that implementing DEI policies within your business attracts top talent. It is clear to see that this is on a steady incline in the minds of top talent. In 2008, the National Association of Colleges and Employers asked new graduates to rank the importance of diversity, and it came twelfth out of fifteen options. In 2020, it became the seventh most important out of nineteen options5. If you want your business to attract and retain talent, supply chain inclusion is going to be very important4. 

• Quicker Innovation Standard  

Large companies must deal with long internal processes in comparison to small businesses (which make up a lot of diverse suppliers) which can make changes a lot more efficiently. This gives supply chains and small businesses an advantage. In an evolving minority market, small businesses can produce new products and solutions to beat out competition6. As they are usually smaller in scale and size, they can adapt more quickly to market changes and business fluctuations4. For strategic and beneficial relationships with larger companies, this gives diversely owned businesses an edge. This is important for those big businesses too. 

Google works with minority-owned small businesses to connect minorities with business opportunities and enable innovation in their supply chain. They even go as far as to outsource areas they don’t cover, such as transportation, in an effort to encourage innovation since these companies frequently use Google products and give them ways to improve8. So, both large businesses and the diverse suppliers within their supply chains benefit from working together. This emphasises the importance of supply chain inclusion. 

• Competition 

The two most recent generations, Millennials and Gen Z, are the most diverse generations in history9. They are also two of the largest. As aforementioned, diversity is an important value for consumers. That is especially the case for consumers that belong to these generations. By focusing on doing business with minority-owned businesses, companies can gain a competitive edge by increasing their standing economically and the buying power of diverse consumers. 

• Morally Right Thing to Do 

Besides all the ways supply chain inclusion can benefit your business economically, there is one more different but very important reason for them. The reason why consumers look for diverse businesses so much is because their morals propel them to10. Similarly, morals should guide business-owners to drive change internally and consider supply chain inclusion as it is the right thing to do. It can ensure that people get the same opportunities and that minority groups feel seen, which are always good things. 

What It Means for Buyers 

When supply chain inclusion is made a top priority, it means that buyers benefit doubly from their consumption. Many consumers feel a social and environmental responsibility with how they spend their money. Not only do they get a product or service of some kind, but they can be assured that their money is being spent on a business minorities have the backing of. They can feel that they have made a purchase with a business that aligns with their ethics. This is said with the support of the data in this white paper that shows this is important to buyers. 

Mitigating Supply Chain Risk  

The intricate nature of modern supply chains makes them susceptible to a wide range of risks and threats. Therefore, mitigating supply chain risk is crucial to ensure business continuity, maintain customer satisfaction, and protect reputation. This essay outlines key points to mitigate supply chain risk, along with their respective explanations. 

Conduct Regular Risk Assessments: Regular risk assessments help identify potential threats and vulnerabilities in the supply chain. This includes evaluating supplier financial stability, geopolitical risks, natural disasters, and cyber-attacks. By identifying risks early, businesses can develop strategies to mitigate or manage them effectively. 

Diversify Suppliers: Over-reliance on a single supplier can lead to significant disruptions in the event of failure. Diversifying suppliers reduces dependence on individual suppliers, ensuring continuity of supply. This also encourages competition, driving innovation and better pricing. 

Implement Robust Contract Management: Clear, comprehensive contracts with suppliers outline expectations, responsibilities, and consequences of non-compliance. This includes specifying quality standards, delivery times, and dispute resolution processes. Robust contract management helps prevent misunderstandings and ensures supplier accountability. 

Develop a Business Continuity Plan: A business continuity plan outlines procedures for responding to supply chain disruptions. This includes identifying alternative suppliers, emergency funding, and communication strategies. By having a plan in place, businesses can quickly respond to disruptions, minimising impact. 

Foster Collaborative Relationships: Building strong, collaborative relationships with suppliers encourages open communication, trust, and mutual support. This helps identify potential risks early, facilitates joint problem-solving, and promotes a shared commitment to supply chain resilience. 

Invest in Supply Chain Visibility: Supply chain visibility enables real-time monitoring of goods, services, and information flows. This includes implementing technologies like RFID, GPS, and cloud-based platforms. Enhanced visibility helps detect disruptions early, enabling swift action to mitigate impact. 

Develop a Risk Management Culture: Encouraging a risk management culture within the organisation ensures that supply chain risk is a shared responsibility. This involves training employees, promoting awareness, and incentivising risk reporting. A risk-aware culture helps identify and address potential risks proactively. 

Procurement category segmentation: Procurement category segmentation is a strategic approach that involves categorising procurement spend into distinct groups, identifying main categories and sub-categories, to effectively manage and optimise the procurement process. This approach enables organisations to gain a deeper understanding of their spending patterns and supplier landscape and identify opportunities to diversify their supplier base. By segmenting procurement categories, organisations can integrate diverse suppliers into the supply chain, promoting inclusivity and equal opportunities, and reduce dependence on a single supplier, mitigating risk and ensuring business continuity. Having diverse suppliers fulfill specific categories and sub-categories can reduce the risk of supply chain disruptions and failures, increase innovation and competition, and improve supplier responsiveness and flexibility. Effective procurement category segmentation enables organisations to create a more robust, agile, and diverse supply chain, better equipped to navigate complex market dynamics and drive long-term success.  

Lumorus: Your Partner Unlocking Sustainable Supply Chain Excellence  

At Lumorus, our team of highly experienced and dedicated experts takes immense pride in our unparalleled ability to empower organisations to elevate their supply chains, expertly balancing the intricate harmony of sustainability, resilience, and performance. Our comprehensive and multifaceted expertise spans a broad spectrum of specialised services, including: 

– Supply chain risk management and mapping, where we employ cutting-edge tools and methodologies to identify, assess, and mitigate potential risks, ensuring our clients’ supply chains are fortified against disruptions and volatility. This includes conducting thorough risk assessments, developing contingency plans, and implementing robust monitoring systems. 

– Sustainable procurement and sourcing strategies, where we collaborate with clients to develop and implement innovative, eco-friendly, and socially responsible approaches to procurement, driving positive impact while minimising environmental footprint. This includes identifying sustainable suppliers, developing green procurement policies, and implementing responsible sourcing practices. 

– ESG reporting and compliance, where our experts guide clients in navigating the complex landscape of environmental, social, and governance regulations, ensuring seamless compliance and transparent reporting. This includes developing ESG reporting frameworks, conducting materiality assessments, and ensuring compliance with international standards. 

– Stakeholder engagement and collaboration, where we facilitate open dialogue and constructive partnerships between clients and their stakeholders, fostering trust, understanding, and mutually beneficial relationships. This includes developing stakeholder engagement strategies, conducting stakeholder mapping, and facilitating collaborative workshops. 

– Digital transformation and technology integration, where we leverage the latest advancements in technology to enhance supply chain transparency, efficiency, and agility, driving business value and competitive advantage. This includes implementing digital supply chain solutions, leveraging data analytics, and integrating emerging technologies. 

  

Through our collaborative efforts, we have had the privilege of working alongside clients from diverse industries, guiding them in: 

– Identifying and mitigating potential supply chain risks, ensuring business continuity and minimising exposure to disruptions. This includes conducting risk assessments, developing contingency plans, and implementing monitoring systems. 

– Developing and implementing sustainable supply chain practices, driving positive impact while enhancing brand reputation and stakeholder trust. This includes identifying sustainable suppliers, developing green procurement policies, and implementing responsible sourcing practices. 

– Enhancing supplier engagement and collaboration, fostering strong, resilient partnerships that drive mutual benefit and shared success. This includes developing supplier engagement strategies, conducting supplier assessments, and facilitating collaborative workshops. 

– Leveraging cutting-edge technology to enhance transparency and efficiency, streamlining operations and driving business value. This includes implementing digital supply chain solutions, leveraging data analytics, and integrating emerging technologies. 

– Driving business value through sustainable supply chain management, positioning clients for long-term success and competitiveness in an ever-evolving market landscape. This includes developing sustainable supply chain strategies, implementing responsible practices, and ensuring transparent reporting. 

By forming a strategic partnership with Lumorus, organisations can tap into our vast expertise and gain access to a tailored sustainable supply chain strategy, meticulously crafted to address their unique needs and objectives. Our collaborative approach enables clients to: 

– Improve supply chain resilience and risk management, ensuring business continuity and minimising exposure to disruptions. 

– Enhance ESG performance and reporting, driving transparent compliance and stakeholder trust. 

– Drive innovation and business growth through sustainable practices, positioning clients for long-term success and competitiveness in an ever-evolving market landscape.  

– Develop a competitive advantage through sustainable supply chain management, driving business value and stakeholder trust. 

– Ensure long-term success and competitiveness through our expertise in sustainable supply chain management. 

Conclusion 

Supply chain inclusion is no longer a nicety, but a necessity for businesses of all sizes. As consumers become increasingly socially conscious and informed, they will expect the companies they support to prioritise diversity, equity, and inclusion throughout their entire operations, including their supply chains. In the future, supply chain inclusion will be a key attribute that sets businesses apart and drives competition. By prioritising supply chain inclusion, companies can not only mitigate risks and improve their bottom line but also contribute to a more equitable and sustainable future. As consumers vote with their wallets, they will increasingly choose to spend their money with businesses that share their values and demonstrate a genuine commitment to inclusion. This shift in consumer behavior will have far-reaching consequences, driving innovation, growth, and profitability for companies that adapt and thrive in an inclusive supply chain environment. Therefore, it is imperative that businesses prioritise supply chain inclusion today to remain relevant and competitive tomorrow. By doing so, they will not only reap the benefits of a more diverse and resilient supply chain but also contribute to a more just and equitable society, where economic opportunities are accessible to all. Ultimately, supply chain inclusion is not just a business imperative, but a moral obligation to create a better world for generations to come. 

 

 

Sources: 
 

[1]Supplier Diversity: Importance in Supply Chain Management (iquantum.ai) 

[2]Diversity, Equity & Inclusion (DE&I) in supply chains (greenstoneplus.com) 

[3]Survey Suggests “Diversity, Equity, and Inclusion” Will Gain Traction With Supply Chain Management – Supply Chain Management Review (scmr.com) 

[4]EB – Economic Impact How Measure Supplier Diversity Program Success v4 | PDF | Fiscal Multiplier | Supply Chain (scribd.com) 

[5]The Business Case for Supplier Diversity in Canada (cfc-swc.gc.ca) 

[6]Page not found – LSQ 

[7]Supply chain | EY – Global 

[8]Why Diversity is Important in Supply Chain Management | MSU Online (michiganstateuniversityonline.com) 

[9]Meet Generation Z, the ‘Millennials on Steroids’ (businessinsider.com) 

[10] The Importance of Ethical Supply Chains to Consumers (assetpanda.com)